UPDATE 1-US court upholds $1 bln award against Uzan family

(Adds details from ruling, background, comments)

NEW YORK, Nov 21 (Reuters) - A U.S. appeals court upheld a $1 billion punitive damages award to Motorola Inc (MOT.N) against the Uzan family of Turkey on Wednesday.

A three-judge panel of the U.S. Court of Appeals for the Second Circuit said the lower court "properly applied the variety of factors relevant to state and federal law."

U.S. District Judge Jed Rakoff had awarded the punitive damages against certain members of the Uzan family, which ran Turkey's second-largest mobile phone operator, Telsim, and a media and banking empire.

Rakoff had concluded that the defendants fraudulently obtained loans from Motorola for more than $2 billion and from Nokia (NOK1V.HE) for about $800 million.

Rakoff had said the family used a "campaign of lies and misrepresentations to swindle Motorola," but in February 2006 he cut the punitive award to $1 billion from $2.1 billion.

The defendants, including an associate of the family, had argued the punitive damages constituted "an economic death sentence" and exceeded their ability to pay, according to the 23-page opinion.

"Judge Rakoff's findings establish beyond cavil the extraordinary nature of the Uzans' wrongful behavior and form a valid basis for the substantial punitive award," Circuit Judge Guido Calabresi wrote.

Motorola Credit Corp, Motorola's financing arm, and Nokia sued five members of the Uzan family, a close associate of theirs, and several of their companies in 2002, charging them with misappropriating loans to Telsim.

The loans, which were taken to finance the development of Telsim, were secured by granting shares as collateral.

But the defendants diluted the value of the collateral by tripling the number of outstanding Telsim shares and creating a new privileged class of unencumbered shares with the power to elect a majority of Telsim directors, according to the opinion.

Turkey seized the assets of the Uzan Group after the collapse of the family's Imar Bank in 2003. In May this year, Turkey said it had raised $6.5 billion through the sale of the assets. Vodafone Group Plc (VOD.L) bought Telsim last year for $4.55 billion.

Ryan Bull, a lawyer for the defendants, did not have an immediate comment. Motorola could not be reached immediately.

Motorola's shares were off 31 cents, or 2 percent, at $15.47 during afternoon trading on the New York Stock Exchange.

(Reporting by Paritosh Bansal; editing by Andre Grenon)

((paritosh.bansal@reuters.com; +1 212 393 9461; Reuters Messaging: paritosh.bansal.reuters.com@reuters.net)) Keywords: MOTOROLA UZAN/

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